Interoperability Will Determine CBDC Winners and Losers

This article was first published on Insights – Ripple

As Congress debates the potential of a second coronavirus stimulus bill, 9 million Americans are still waiting for their first $1,200 payment check to arrive in the mail. The inability of our existing financial infrastructure to respond quickly and effectively to an emergency like COVID-19 has prompted fresh debate about how innovations like digital currencies could help.

With the pandemic also encouraging the use of touchless payments instead of cash, it’s no surprise to see Central Banks around the world racing to cement their perspective on the issuance of Central Bank Digital Currencies (CBDCs). Governments that once viewed digital assets as a threat, now see how companies like Ripple are working closely with traditional financial institutions to develop efficient, innovative global payment solutions that directly benefit businesses and individuals.

The digital asset industry has finally matured to the point that CBDCs are now a question of when, not if. While COVID-19 has prompted specific reasons for increasing mainstream acceptance and understanding of the benefits of digital assets, the longer-term outlook for CBDCs takes in broader economic benefits, including more efficient payment systems, greater financial inclusion and increased scope for innovation.

Bridging the Gaps Between a Range of Solutions

Many of the world’s Central Banks have already begun exploring the feasibility and utility of digital currencies, with China expected to launch its CBDC into production this year. The goals of each country’s CBDC will be driven by its specific market challenges and opportunities, which makes it inevitable that different solutions and technologies will emerge from each environment. 

While focusing on domestic use cases is understandable for individual countries, we live in an increasingly interconnected global economy. It will be critical to bridge the gaps between the various CBDC initiatives with existing payment systems as well as other digital currencies to ...

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